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Benchmarking Analysis for Sharing the gain Project
Appendix A3.2, Summary Results
This benchmarking exercise was conducted as part of the CIPFA-SDCT Sharing the gain
project. While the data is solely concerned with the district council finance function, it is
intended to provide a broader illustration of how benchmarking can be used in the early
stages of any shared services or partnership project.
The data shown in the following slides is drawn from a peer group of 11 district councils.
Their performance is then compared to broader (cross sector and international) benchmarks
to illustrate where the councils lie in terms of ‘world-class’ performance. Because this
involves a much broader population than just district councils, care needs to be taken in
making assumptions about the feasibility of councils – even in a collaborative environment –
achieving the cost benchmarks indicated.
Copyright CIPFA & Perform! World Ltd 2010. Please respect this Intellectual Property and all related
copyrighted materials, and use the benchmark results and associated data capture form for internal
purposes only. Permission is granted for such use by Councils using this specific project’s outputs, and
should not be used for any other purpose or adapted in any way without the prior consent of CIPFA and
Perform! World Limited.
1
Objectives
Why did we conduct a finance benchmarking exercise?
 We invited a number of District Councils (DCs) to participate in a
benchmarking study to understand typical current costs, FTE and volume
data by key Finance sub-process
 The aim was to baseline participating District Councils (DCs) current state
performance and quantify gaps compared to average and world-class (upper
quartile) performance
 It was also important to demonstrate the linkages between benchmark
performance levels and the evidence based research into world-class finance
management (WCFM), including the benefits that could arise from adopting
shared services as part of an overall potential solution to improve efficiency
and effectiveness of processing
 Although this exercise focused on finance and district councils, it can be
seen as an exemplar for the sort of benchmarking exercise needed when
any groups of bodies are looking to share services
© 2010 CIPFA and Perform! World Limited All rights reserved.
Objectives
Outcome sought from this exercise:
 Provide participating councils with visibility and understanding of current
performance to support any potential future roadmap for change with
respect to financial services and the potential adoption of shared services
 Ensure any desired changes are likely to deliver realistic efficiency and
effectiveness improvements and are supported by facts and evidence
© 2010 CIPFA and Perform! World Limited All rights reserved.
Caveat on Benchmarking Results:
 To maintain anonymity, codes have been used for the 11 District Council
participants submitting data
 Much of the data was provided on a “self-service” basis by councils, and
although an element of on site validation and normalisation of data was
performed to achieve the highest level of accuracy in the timescales allowed,
please view these as indicative measures when drawing any specific
conclusions
 However based on these initial findings, you will see there is a consistent
theme emerging from the following results…
© 2010 CIPFA and Perform! World Limited All rights reserved.
A note on how the
figures have been derived

A commercial company's size is primarily determined by the level of
'sales/revenue', which is the figure used in benchmarking the amount
spent on financial services. For District Councils, a surrogate of 'gross
revenue expenditure' has been used in place of 'revenue' as it was felt
that this figure best represented the demand for financial services
and could be derived with a high degree of consistency between councils.

The Cipfa BVACOP figure for gross revenue expenditure has been adjusted
at a high level to avoid a distorted view on workloads and provide a fair
comparison between councils. A pragmatic approach has been taken
with adjustments to exclude FRS 17 charges and replace with actual cash
spent on employers pension contributions and retirement benefits, exclude
amortisation, depreciation and impairment of assets, impairment of
investments, loss on sale of assets and capital expenditure funded from
revenue.

Similarly, where the commercial indicator has used 'total cost', derived
from the expenditure side of the P&L account, the surrogate figure for
district councils has remained the adjusted figure of 'gross revenue
expenditure' in order to avoid distorting inter-council comparison.
© 2010 CIPFA and Perform! World Limited All rights reserved.
Report Contents

Executive Summary

Key Findings – District Council Participants Performance vs Average &
Upper Quartile Performance

Other High Level Performance Graphs

Detailed Process Graphs comparing Performance vs Average & Upper
Quartile Performance
© 2010 CIPFA and Perform! World Limited All rights reserved.
Executive Summary (1)
Summary

We are grateful for benchmark data provided by 11 District Councils as a baseline for
comparative measurement purposes

Overall benchmark performance for District Council participants based on the top level
metric of Finance Cost as % Total Costs is below average compared with other
organisations in the broader benchmarking set

Drilling down further into specific Finance metrics at sub process level reveals particular
areas of relative under performance for certain processes, e.g. productivity and unit
cost per transaction (see detailed graphs).

District Council Finance departments are relatively small and have restricted access to
investment so it is unlikely that an individual DC can achieve world-class performance
purely on its own. Any opportunity to do this is only likely to happen if a reasonable
number of councils group together to pool investment and realise significant economies
of scale. This is also likely to involve implementing technology, process and people best
practices and adopting good shared services principles

The following graphs illustrate participants performance in a number of crucial areas…
© 2010 CIPFA and Perform! World Limited All rights reserved.
Executive Summary (2)

The following graphs illustrate the overall performance levels for District Council
Finance functions

Total Finance Cost as % Total Costs is:
 generally below average compared to organisations WITHOUT shared services (decentralised organisations)
 significantly below upper quartile compared to organisations WITH shared services
(centralised organisations)

These overall performance measures need to be taken in context along with other
Finance measures (see next slides)
© 2010 CIPFA and Perform! World Limited All rights reserved.
Executive Summary (3)

The following graphs illustrate overall performance levels for District Council
Transactional processes only

District Councils TRANSACTIONAL Finance Cost as % Total Costs is:
 Well below average performance compared to CENTRALISED organisations e.g.
WITH Shared Services
 Closer to average performance, but still not as good, compared to DECENTRALISED
organisations, e.g. WITHOUT Shared Services

This demonstrates the prima facie benefits of implementing a World-Class Finance
Management model that might include elements of shared services
© 2010 CIPFA and Perform! World Limited All rights reserved.
Key Findings (1)

District Council Accounts Payable process performance is mainly below average in
terms of productivity and consequently causes higher unit cost per invoice processed

Accounts Receivable is relatively low productivity-wise. This in part may be due to the
relatively ad hoc/ non-standardised nature and multiple/ varied nature of sources of
council income

The general ledger and monthly accounting FTE and Cost appears to be particularly
high for the size of organisation (based on Total Costs), which may be due to lack of
economies of scale

Payroll productivity, based on employees supported and payslips, is below average
due to the relatively small populations supported by individual payroll departments.
This is a classic area where economies of scale can be achieved through centralisation,
particularly where payrolls are essentially monthly and lack complexity
© 2010 CIPFA and Perform! World Limited All rights reserved.
Key Findings (3)

Budgeting and Advisory is above average compared to other organisations. This may
in part reflect an inefficient process, and not spending significant value-added time on
decision support work with service departments - something that is a centre-piece of
a WCFM environment

Audit and Compliance costs are high compared to average and upper quartile. This
may in part be due to the nature of public sector requirements. A shared services
environment would normally reduce the need to audit multiple systems and processes

Overall salaries and other supporting costs for most processes are higher compared to
average and world-class benchmarks. This, combined with lower productivity in many
areas - and limited ability to scale up - causes below average performance overall

If deemed appropriate, the step change in Finance, from below average to upper
quartile performance, might well demand a move towards a shared services
environment, adopting best practice technology and processes, as well as realising
economies of scale
© 2010 CIPFA and Perform! World Limited All rights reserved.
Other Main Performance Graphs
The above graphs show that the 11 district councils’ comparative
performance for Finance Staff per £500m Total Costs is, in the main,
above Average. For transaction processing only, it has a similar profile.
© 2010 CIPFA and Perform! World Limited All rights reserved.
Detailed Graphs (4)
Detailed Graphs Comparing District
Council Performance Versus Average
and Upper Quartile
© 2010 CIPFA and Perform! World Limited All rights reserved.
Accounts Payable
Performance Graphs
The above graphs show the district councils’ Accounts Payable (AP) performance compared to all Organisations:




AP Cost as % Total Costs in most cases are mainly above average
AP FTE per £500m Total Costs in most cases is between average and upper quartile or above average
Unit cost per invoice is generally above is between average and upper quartile or above average
Productivity for invoices processed per annum per FTE in most cases is around or below average
© 2010 CIPFA and Perform! World Limited All rights reserved.
Average Salary Graphs
The above graphs show districts’ average salaries cost performance compared to all Organisations.
In most cases the salary cost per FTE for AP, Accounts Receivable (AR), sales invoicing and General ledger (GL)
processes is higher compared to average and upper quartile performance
© 2010 CIPFA and Perform! World Limited All rights reserved.
Finance Effectiveness
Performance Graphs
The above graphs show a few effectiveness metrics compared to all Organisations:

Automation levels of payments and journals is relatively high in most cases. Aged Debt % and Cycle time to
submit to auditors is high.
© 2010 CIPFA and Perform! World Limited All rights reserved.
Sales Invoicing
Performance Graphs
The above graphs show districts’ Sales Invoicing performance compared to all Organisations:



Sales Invoicing as % Total Costs is high in most cases
Sales Invoicing FTE per £500m Total Costs is above average or between average and upper quartile
Sales Invoicing Cost per Invoice is significantly below average due to low levels and relatively manual
processes
© 2010 CIPFA and Perform! World Limited All rights reserved.
Accounts Receivable
Performance Graphs
The above graphs show districts’ AR performance is below average in most cases compared to all Organisations:




AR Cost as % Total Costs is above average in most cases but features relatively low levels of AR activity
AR FTE per £500m Total Costs is mainly between average and upper quartile with relatively low levels of activity
Unit Cost per AR Remittance is around or above average
AR Remittances processed per FTE is mainly around or below average
© 2010 CIPFA and Perform! World Limited All rights reserved.
General Ledger
Performance Graphs
The above




graphs show districts’ GL/ Reporting performance compared to all Organisations:
GL Cost as % Total Costs is well above average in most cases
GL FTE per £500m Total Costs is above average in most cases
Journal entries processed per FTE is well below average
GL Cost per journal entry is well above average
© 2010 CIPFA and Perform! World Limited All rights reserved.
Treasury Performance Graphs
The above graphs show districts’ Treasury performance compared to all Organisations:

Treasury Cost as % Total Costs is average or well above average
Treasury FTE per £500m Total Costs is above average in most cases
© 2010 CIPFA and Perform! World Limited All rights reserved.
Financial Planning &
Analysis Performance
The above graphs show DCs’ F, P & A performance compared to all Organisations:


Financial Planning & Analysis Cost as % Total Costs in most cases is above average
Financial Planning & Analysis FTE per £500m Total Costs shows FTE mainly between average and upper quartile
© 2010 CIPFA and Perform! World Limited All rights reserved.
Internal Audit &
Compliance Performance
The above graphs show DCs’ Internal Audit & Control Costs & FTE compared to all Organisations:

Audit Cost as % Total Costs and FTE levels are well above average - perhaps reflecting the nature of public
sector requirements, but would also be due to full examination requirements of smaller standalone entities’
Finance functions
© 2010 CIPFA and Perform! World Limited All rights reserved.
Technology & Other
Finance Cost Graphs
The above graphs show districts’ Technology and other Finance Costs (e.g. facilities) performance compared to all
Organisations:

Technology Cost as % Total Costs is relatively low in many cases, potentially reflecting underinvestment in
this area due to affordability reasons

Other Finance Costs as % Total Costs is mixed
© 2010 CIPFA and Perform! World Limited All rights reserved.
Payroll Performance Graphs
The above graphs show districts’ Payroll performance compared to all Organisations:




Payroll Cost as % Total Costs is well above average
Payroll FTE per £500m Total Costs is generally above average
Payroll Cost per employee is well above average in most cases
Average Salary per Payroll FTE is well above average
© 2010 CIPFA and Perform! World Limited All rights reserved.
Payroll Performance Graphs
The above graphs show DCs’ Payroll performance compared to all Organisations:


Cost per Payslip is well above average in most cases
Payslips processed per FTE p.a. is mainly below average
© 2010 CIPFA and Perform! World Limited All rights reserved.